December 6, 2011

London is the office investment target of choice

A recent report entitled "Who Owns the City", researched by Professor Colin Lizieri, of Cambridge University, highlights some interesting aspects concerning City of London's commercial office market; which is very buoyant but often neglected by mainstream press coverage.
Professor Lizieri's research provides 4 main conclusions, namely that:

1. Foreign ownership of City of London offices now stands at 52% and tha traditional institutional ownership has decreased from 29% in 2005 to 17% in 2011.

2. London is the office investment target of choice attracting €72 billion inward investment dwarfing Paris (€43 billion) and
Frankfurt (€11 billion) as the most attractive market for office investment in Europe between 2007-2011.

3. The average value of buildings acquired by foreign investors was £91 million (€106m) as against an average purchase price of £27 million (€32m) for UK buyers.

4.Germany remains the largest overseas City office investor with a 16% share,and there has been an expansion of Middle Eastern ownership, which currently accounts for a 6% share. Japanese holdings have declined to 2% compared with a peak of around 11% in the early 1990s.

The report also highlights that high net worth individual investors are "playing an increasingly significant role within the ‘Square Mile' " and for that to continue, the vitality of the financial sector is integral to the continued success of the Square Mile's office market:

Due to the fact that 41% of the City office space is owned and occupied by firms in the Finance, Insurance and Real Estate (“FIRE”) sector, and 57% by financial
and business services firms, there is considerable ‘functional specialisation’ in the City. The long-term fortunes of occupiers and the investment market
are therefore locked together.